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Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?

Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs, financial stress, and/or monetary policy may be possible explanations for the asymmetric response. This paper uses a near vector autoregressive model of the U.S. economy to examine where the asymmetry might originate. The analysis uses counterfactual experiments to determine that monetary policy alone cannot account for the asymmetry.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Security and Geopolitics – Energy Security

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q48 - Energy: Government Policy

Keywords: Oil prices shocks, asymmetry, US economy, GDP, monetary policy

DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-2

Published in Volume23, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.